News from Connecticut

HOA CONSTITUTIONAL GOVERNMENT: CAI finally admits to being a business 501(c)6 trade organization

By George K. Staropoli

January 15, 2017

CAI finally admits to being a business trade tax-exempt organization.

Community Associations Institute (CAI) is a national nonprofit 501(c)(6) organization founded in 1973 to foster competent, responsive community associations through research, training and education. […] We work to identify and meet the evolving needs of the professionals and volunteers who serve associations, by being a trusted forum for the collaborative exchange of knowledge and information, and by helping our members learn, achieve and excel.[1]

In my 17 years as a HOA reform activist this is a landmark first! This is a personal achievement. There was very little support from other reform advocates and homeowners regarding misrepresentation by CAI.[2] As a result of my repeated criticisms and exposes, CAI had to apparently fess up.

Over its 44 years in existence CAI has mislead its viewers, members, the public and legislators as to its legal tax-exempt status. It news releases, websites, Common Ground magazine, communications with state and federal elected officials, and court filings that refer to representing homeowners and HOAs.[3] CAI is not allowed to have HOAs as members![4] Example, CAI’s current web page reads,

CAI provides information, education and resources to the homeowner volunteers who govern communities and the professionals who support them. CAI members include association board members and other homeowner leaders, community managers, association management firms and other professionals who provide products and services to associations.

McClatchyDC: HOAs from hell: more horror stories, more fraud – and prospect of legislative action

By Judy L. Thomas

December 23, 2016

In Georgia, a decorated Army veteran who lost a leg in Afghanistan is now ensnared in a battle on the home front — with his homeowners association.

The HOA filed a lien on his house related to the placement of his trash cans.

From Maryland to California, prosecutors have charged HOA officers and property management officials in fraud and embezzlement cases with losses that total in the millions.

And in Missouri, lawmakers are working on a proposal to make homes associations more accountable, with one saying homeowners in his district have become so incensed with their HOAs that “we are one step away from pitchforks and torches.”

Lawmakers in some states are saying enough is enough. It’s time, they insist, to take on a more aggressive role in regulating the $85 billion industry.

“It’s the number one constituent issue in my district,” said Missouri state Rep. Bryan Spencer, a Republican from Wentzville, near St. Louis. “This is basic property owner rights. It’s a fundamental right that we should have as Americans.” Read more:

The Washington Post: Condominiums in Crisis: Financial troubles put many communities at risk

By Bill Turque

September 18, 2016

For five summers, a tarp has covered the swimming pool at Grand Bel II, a condominium community in Silver Spring that has no money for lifeguards, chemicals or insurance. The Vistas at Washingtonian Woods in Gaithersburg faces $600,000 in repairs but has just $400,000 in cash reserves.

At Saxony Square in Alexandria, an unemployed man nine months behind on his mortgage negotiates with lenders to keep his two-bedroom condo. His neighbors struggle to pay their monthly fees; since 2010, Saxony’s board of directors has filed more than 80 court actions to try to collect such assessments.

Even as posh condos rise in trendy neighborhoods around the nation’s capital, manyolder complexes are mired in a recession that never ended. A cycle of aging infrastructure, limited resources and foreclosure is putting these communities in a deep financial hole, threatening what traditionally has been an affordable path to homeownership for the working class. Read more:

Adam L. Bendett is President and shareholder of Bendett & McHugh, P.C. He is currently the Managing Attorney for the Connecticut Foreclosure Group and oversees many of the operational functions of the firm. He has represented lenders and mortgage servicers in mortgage default matters for over 26 years.

On April 26, 2016 the Connecticut Supreme Court issued a decision in The Neighborhood Association, Inc. v. Jill M Limberger, et al, 321 Conn. 29, which held that pursuant to Conn. Gen. Stat. §47-258(m)(1)(C), prior to any foreclosure action of an homeowners’ association (HOA) commenced on or after July 1, 2010, the HOA must have either (1) had a vote to authorize the individual foreclosure; or (2) had a collection policy adopted as a rule, with notice to unit owners and a minimum ten day comment period as required under the Conn. Gen. Stat. §47-261(b). If neither one of these two criteria are met, the HOA lacks subject matter jurisdiction in its foreclosure action. In Limberger, the HOA’s foreclosure action was dismissed for lack of subject matter jurisdiction despite the HOA having adopted a “standard collection policy” because the HOA’s Executive Board had not provided notice to the unit owners prior to adopting the policy pursuant to Conn. Gen. Stat. §47-261(b).

HOW LIMBERGER AFFECTS PENDING AND FUTURE HOA FORECLOSURE ACTIONS

In Connecticut HOAs are given a super-priority lien in the amount of nine months’ worth of common charges and expenses (in addition to reasonable attorney’s fees and costs) over first and second mortgages. Accordingly, an HOA typically names as a defendant in its foreclosure action the first and second mortgagee of record, in addition to all other subordinate lien holders. For this reason, a mortgagee will often take title to a property through protecting its interest in the HOA action, by either bidding at the HOA foreclosure action, or more typically, redeeming the priority debt of the HOA on its assigned law date after a judgment of strict foreclosure. This firm has been in conversations with several of the major title insurance companies about how Limberger affects insurability of title for a property acquired through an HOA action. Two of such companies have confirmed they will insure title if either (1) the HOA specifically pleads in its complaint that it has complied with Conn. Gen. Stat. §47-258(m)(1)(C) ), including, when applicable, the notice provisions of Conn. Gen. Stat. §47-261(b); or (2) the HOA executes an affidavit specifically setting forth its compliance with said statutes. A third title company has responded to date that they will require the affidavit. Therefore, at this time, it is recommended that in pending HOA cases, the mortgagee obtain an affidavit from the HOA’s counsel establishing compliance with Conn. Gen. Stat. §47-258(m)(1)(C) ), including, when applicable, the notice provisions of Conn. Gen. Stat. §47-261(b), and also confirm, and if necessary, require that compliance with these statutes are specifically plead in the HOA complaint as well. Read more:

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